Nokia Rising: Lumia Surprises to the Upside

By Tiernan Ray

Shares of Nokia (NOK) are higher by 12 cents, or 7%, at $1.85 this morning after the company reported revenue and profit in accord with a pre-announcement back on June 14th, at which it had said Q2 results would show a deeper-than-expected operating loss.

Nokia’s total revenue of €7.54 billion missed analysts’ average estimate for €7.87 billion, according to FactSet, while a net loss per share of 8 cents was better than estimates for negative 9 cents to 10 cents. Nokia had an operating loss of €826 million, though it managed to produce cash from operations of €102 million.

Despite a 26% fall in Nokia’s “Devices & Services” Q2 sales, to €4.02 billion, and a 5% drop in volume, the company said it shipped 4 million “Lumia” smartphones developed in conjunction with Microsoft (MSFT).

That may be helping to lift the stock this morning:

Nomura Equity Research’s Stuart Jeffrey this morning reiterated a Neutral rating on the shares, writing that the 4 million Lumias beat his own 3.4 million forecast.

“Mobile device revenues and gross margins were stabilised in the quarter and may yet benefit from new all-touch launches in H2,” writes Jeffrey.

And William Power with R.W. Baird, who has an Underperform rating on the shares and a $2 price target, wrote that the company’s total smartphone shipments of 10.2 million were lower than the 11.4 million he was projecting, but that the Lumia number was above his own 3 million estimate, “despite significant Nor th America weakness,” a result he characterizes as “solid.”

He adds, however, that “Nokia shipped just 600,000 total devices in the U.S., flat with Q1, despite the Lumia 900 launch at AT&T.”

Margins for smartphones, morever, were “ugly,” writes Power, noting the 1.7% smartphone gross margin, down from a positive 15.6% in Q1.

Nokia did note its Nokia Siemens equipment business returned to an operating profit in the quarter. Also, the company’s cash balance of €4.2 billion was boosted by a €400 million payment for patent licensing, which may have been from an agreement with Apple, writes Nomura’s Jeffrey.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.